Fresh off the sale of its in-house retail advisory business, Goldman Sachs is making a new value proposition to RIAs.
Advisors, according to the Wall Street powerhouse, should be mining its expertise on everything from helping clients avoid taxes on investment gains and choosing the best combination of active and passive ETFs to gaining access to alternatives like private equity and credit.
Speaking on a webinar Thursday, Goldman executives discussed ways they can help RIAs open doors for their high net worth investors.
"One of the things that advisors are really looking for is efficiency and ease of doing business but also, which may seem counterproductive, the ability to customize and deliver complexity to their clients and appreciate the unique nature of what they have," said Alexandra Wilson-Elizondo, the co-chief of multi-asset solutions at Goldman Sachs Asset Management.
Goldman entered the custody business in May 2020 with its purchase of Folio Financial, a self-clearing custodian with $11 billion in assets at the time. Besides NewEdge Wealth, it has also added the Overland Park, Kansas-based RIA aggregator Creative Planning and Reston, Virginia-based Burney Company to its custodial clients, among others.
Goldman's push into the custody and portfolio management business came shortly after its 2019 acquisition of United Capital, renamed Personal Financial Management under Goldman, in order to expand into the mass-affluent market. That strategy was short lived; the sale of the PFM business to Creative Planning closed in the fourth quarter of last year.
Jeff Nash, the CEO and co-founder of the recruiting firm Bridgemark Strategies, said the custody industry was ready for a new entrant. A Cerulli report last year found that four firms — Schwab, Fidelity, Pershing and LPL Financial — now control nealry 85% of the custody market.
Nash said Goldman's advantage lies in its reputation for working with the wealthy. The Goldman name, he said, seems to be particuarly attractive to advisors who have left a wirehouse to join an RIA and are looking for a place to custody their high net worth clients' assets.
Nash said it will no doubt offer some assurance to investors who've followed an advisor from a big firm to a smaller RIA "that it's Goldman's name that shows up on their statements."
"It's good for advisors that they can tell clients, 'That's where your money is,'" he said.
Meanwhile, Goldman has been continuing to shift its focus from providing retail advice to finding ways to support RIAs, estimated to have more than $7 trillion under management.
In an interview last month with Bloomberg, Wilson-Elizondo said Goldman aspires to secure a place among the top five portfolio managers. The $14.5 billion Goldman now manages in model portfolios puts it at the No. 9 spot behind BlackRock, Wilshire Associates, Capital Group and other heavy hitters, according to a Cerulli research report cited by Bloomberg.
Broadridge Financial Solutions, a fintech provider, has estimated the market for outsourced portfolios will double to $11 trillion by the end of 2028. But model portfolios are just one way the firm is seeking to work with RIAs.
It also provides access to a bevy of equity, fixed income alternative and money markets funds, and it helps investors minimize costs through strategies like tax-loss harvesting — which involves using investment losses to offset the need to pay capital gains taxes. A particular strength is in separately managed accounts, customized portfolios for wealthy investors with complex needs.
Attesting Thursday to the benefits of working with Goldman was Cameron Dawson, the chief investment officer of Stamford, Connecticut-based advisory firm NewEdge Wealth. NewEdge Wealth, which has more than $8 billion under management, entered into a deal last year to add Goldman as a custodian of its client assets.
Dawson said Goldman makes it easy for clients who use its model portfolios to understand what they're invested in.
"It gets back to knowing what you own and why you own it," Dawson said during the webinar. "It's the size and ability to have a really robust investment team, which allows us to have solutions of our own things like model portfolios."
Gregory Calnon, the co-head of public investing at Goldman Sachs Asset Management, said on Thursday that the firm recently conducted a survey asking 1,000 wealthy U.S. investors asking what they most wanted from an advisor. Calnon said two themes emerged.
"The first theme is more is more," he said. "Investors expect advisors to provide more comprehensive solutions across their wealth needs. And clients who were given more solutions were overwhelmingly more loyal, more satisfied and gave more referrals."
The second, he said "is to make it personal investor friendly — offer solutions that meet them where they live in specific and personal ways."
Sylvia Yeh, the head of fixed income wealth solutions at Goldman Sachs Asset Management, said Goldman can help advisors build separately managed accounts — portfolios for individual investors — designed to maximize the tax savings on bonds and other fixed-income investments.
"It's one account that builds out a fixed income portfolio tailored to a client's state of residence and that tax rate across multiple fixed income asset classes," Yeh said. "It holistically provides our clients with broad access to investment-grade fixed income and allows us to maximize after-tax income across a broad set of investments. It's really resonating with our clients."
